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Builder Confidence Posts Solid Gain Following Last Month's Historic Drop

In a signal that the housing market is showing signs of stabilizing and gradually moving forward in the wake of the COVID-19 pandemic, builder confidence in the market for newly built single-family homes increased seven points in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. The rise in builder sentiment follows the largest single monthly decline in the history of the index in April.

"The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey," says Dean Mon, NAHB chairman. "At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings." 
"Low interest rates are helping to sustain demand," says Robert Dietz, NAHB chief economist. "As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors."

All the HMI indices posted gains in May. The HMI index gauging current sales conditions increased six points, the component measuring sales expectations in the next six months jumped 10 points and the measure charting traffic of prospective buyers rose eight points.